Security Token: the SEC rejects the Grayscale Filecoin Trust
Security Token: the SEC rejects the Grayscale Filecoin Trust

Security Token: the SEC rejects the Grayscale Filecoin Trust

By Stefania Stimolo - 18 May 2023

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The US Securities and Exchange Commission (SEC) is back on the attack on the security token front, this time rejecting the Grayscale Filecoin Trust’s application for registration.

The motivation is the recognition of FIL as a security. 

The case of the Grayscale Filecoin Trust rejected by the US SEC

The battle of the US Securities and Exchange Commission (SEC) to regulate crypto continues. This time it was the turn of Filecoin (FIL), defined by the agency as a security. 

Disclosing the news was Grayscale Investment itself, the world’s largest digital currency asset manager, which had its application to register the Grayscale Filecoin Trust rejected by the SEC. 

Basically, two days ago, the US SEC reportedly sent a comment letter from its staff stating that the Trust’s underlying asset, namely crypto Filecoin (FIL), meets the definition of security

Therefore, Grayscale should have promptly withdrawn the registration statement.

As the crypto-asset management company proceeds to respond to the SEC, it wanted to disclose its thoughts and possible future situations in its announcement as follows:

“Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position. 

Grayscale cannot predict whether the SEC staff will be persuaded that Grayscale’s position is correct, and if not, whether it may become necessary for Grayscale to seek accommodations that would enable the Trust to register under the Investment Company Act of 1940 or, alternatively, seek dissolution of the Trust.”

SEC: Filecoin is a security token

This decision by the SEC staff, comes within a month of Grayscale’s application for registration, but a full 2 years after its launch. 

And indeed, Grayscale had added the Filecoin Trust along with other crypto products as early as March 2021. 

Thus, the SEC is only now noticing that only the crypto Filecoin turns out to be a security. Despite this episode, FIL continues to follow an upward trend, with the price returning to $4.55 in the last week. 

Looking at the chart for the past month, FIL turns out to be in a price dump of almost 28%, as it started at $6.30. 

The “security token” issue will end with the verdict in the Ripple lawsuit

The “security token” issue that has plagued the crypto world for years is expected to come to an end with the final and official verdict of the Ripple vs SEC lawsuit

And indeed, while the staff has now declared FIL as security, there is actually no official document yet to prove its veracity. That is why Grayscale can still appeal. 

In contrast, those who stand to suffer what may affect the entire crypto world at the regulatory level in the US is Ripple, which, since 2020, has been in litigation over the same issue: that XRP is a security. 

The outcome of this lawsuit could reshape the regulations and classifications of all cryptocurrencies and thus the future of the crypto market in general. In the meantime, XRP has suffered primarily from this fight, having limited access to its reserves, to crypto-exchanges that have delisted it over time, and also with its price. 

Nevertheless, XRP still sits in sixth position by market capitalization, and at its current price of $0.46, registering a 10% pump over the past seven days.

Stefania Stimolo

Graduated in Marketing and Communication, Stefania is an explorer of innovative opportunities. She started out as a Sales Assistant for e-commerce, and in 2016 she began to develop a passion for the digital world, initially in the Network Marketing sector, where she discovered and became passionate about the ideals behind Bitcoin and Blockchain technology, which lead her to work as a copywriter and translator for ICO projects and blogs, and organize introductory courses.

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